Beyond Bitcoin: Fidelity May Expand Crypto Custody to More Assets

The world’s fourth-largest asset manager, Fidelity, is exploring the possibility of expanding its custodian services beyond Bitcoin to other assets in the crypto market.

Tom Jessop, the head of Fidelity Digital Assets, a cryptocurrency custodial service provider operated by Fidelity, said that the organization is evaluating the demand for the top five cryptocurrencies in the market and may potentially integrate support for the remaining assets.

The Fidelity executive said at the Block FS conference in New York:

“I think there is demand for the next four or five in rank of market cap order. So we will be looking at that.”

The statement of Jessop comes in a time during which major financial institutions like $70 billion Goldman Sachs and $27 billion State Street are waiting for either regulatory clarity or sufficient demand from customers to support cryptocurrencies.

Demand From Institutional Investors

Most of the infrastructure that is being built by leading financial institutions in the U.S. market are being tailored towards institutional investors that are seeking to invest at least $5 million to the cryptocurrency market, which is the minimum investment threshold on Coinbase Custody.

Currently, the demand for crypto from institutional investors remains an uncertainty and the only way the market can evaluate it is through the evaluation of the performance of custodians that already the exist in the space — that includes Fidelity, Coinbase, and BitGo.

Throughout the past eleven months, the cryptocurrency market has lost about 85 percent of its value. As such, the demand for cryptocurrencies has certainly declined by a significant margin since early January.

But, the evaluation of adding additional digital assets by Fidelity, which require changes to its infrastructure and the structure of its custodian solution, suggests that the organization is seeing enough demand from institutional investors to justify placing more resources to strengthen its product.

State Street, an American financial services and bank holding company, said that it also sees sufficient demand and interest toward cryptocurrencies as an asset class.

At a New York conference, Jay Biancamano, State Street’s managing director for digital product development and innovation, said:

“There is no sense of urgency on the part of our clients to move into these assets right now. When they do, we want to meet them there. There is a very high level of interest but no need to move because currently none of our clients are looking for us to house these assets in custody.”

Until the company receives a regulatory green light from local financial authorities, State Street cannot begin to operate as a custody, regardless of the increasing interest towards the asset class. Goldman Sachs is in a similar position, and it is waiting for regulatory clarity before it officially begins serving customers as a cryptocurrency custodian.

Regulation Holding Companies Off

The regulatory barrier between financial institutions and digital asset custodianship is preventing Goldman Sachs, State Street, Morgan Stanley, and more corporations from storing cryptocurrencies on behalf of their customers.

While it could take months for major financial institutions to receive regulatory approval, the companies see enough demand in crypto to justify its entrance into the cryptocurrency sector.